Learn the trade here. Make it on tradeMONSTER

Options Trading News

October 3, 2013  Thu 3:47 AM CT

SPX: SEE CHART GET CHAIN FIND STRATEGIES
A huge put spread in the S&P 500 Index PM options is positioning for the possibility of a steep selloff in the coming weeks.

More than 54,000 SPXPM options traded, not far off the total open interest but far above the daily average of just 1,808 contracts in the last month. The action came almost entirely in an October put spread, as a trader bought the 1550 puts in big blocks for $1.95 and $2 while selling the 1500 puts for $1.  

The trader is spending $1 on this vertical spread, which is the maximum amount at risk. The maximum gain on this trade is $49, which would be realized if the S&P 500 is below $1500 at the October expiration in just over two weeks, which carries it just past the federal debt-ceiling deadline. (See our Education section)

The regular monthly SPX options expire on the morning of that same day. The weekly and quarterly options, on the other hand, are PM-settled. So the SPXPM options really come into play only on the Friday of the regular expiration and are not that widely traded.

But these contracts are clearly timed around the debt ceiling and are poised to make a huge profit if things go very badly. As such, this is very likely "tail-risk hedge" as opposed to an outright bearish bet.

The S&P 500 was down just 1.13 points to 1693.87 at yesterday's close. It was at an all-time high of 1729.86 two weeks ago and last below 1500 in late February.
Share this article with your friends


Related Stories

SPX

Futures spike up on central banks

November 21, 2014

S&P 500 futures are up 0.8 percent, but Europe is leading the charge with a move of more than 2 percent. Central bankers in China and Europe fueled the moves.

SPX

Quiet agenda before Thanksgiving

November 21, 2014

Today's calendar is empty, followed by a busy week heading into Thanksgiving next Thursday. The only items are quarterly results from Foot Locker and ANN.

SPX

Stocks pull back on weak global data

November 20, 2014

S&P 500 futures are down 0.4 percent, but the losses are much sharper in Europe. Australia was the only big mover in the Asia-Pacific region, with a drop of 1 percent overnight.

SPX

Economic, company news on tap

November 20, 2014

Initial jobless claims and consumer prices for October get the ball rolling at 8:30 a.m. ET. Best Buy, Dollar Tree, GasLog, and JinkoSolar announce quarterly results before the opening bell.

SPX

Stocks hold firm before housing data

November 19, 2014

S&P 500 are little-changed, fighting back from modest losses earlier in the morning. Italy and Germany are the biggest movers across the Atlantic, while Asia was moderately lower overnight.

Premium Services

Webinar Playback

eSignal "Back in Black": Multi-Speaker Free Webinar

Education & Strategy

Some things aren't what they seem

As we scan the Heat Seeker, Depth Charge, and other option-tracking systems, we sometimes see heavy activity in calls and...

View more education articles »
optionMONSTER stockMONSTER tradeMONSTER